Flexible Spending Account Employee Guide

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1 WHAT IS A FLEXIBLE SPENDING ACCOUNT (FSA)? A Flexible Spending Account, sometimes referred to as a Section 125 Plan, is a company-sponsored program, which allows you to voluntarily set aside pre-tax dollars for reimbursement. These reimbursements are for expenses approved by the IRS for such items as medical, dental, vision and dependent daycare expenses which would otherwise be paid by you on an after-tax basis. Your employer determines the type of expenses allowed by the Plan. HOW DOES IT REALLY WORK? You decide how much to set aside in each account. Each pay period a pre-tax deduction will be taken from your paycheck. This money is set aside until you submit an eligible expense throughout the year. An eligible expense would include certain childcare and medical expenses not covered by your insurance, including prescription drugs and over-the-counter items. TYPES OF ACCOUNTS: Health Care Flexible Spending Account Even if you have excellent health benefits, there are always expenses you have to pay out of your pocket. Most health plans require that you satisfy a deductible or other cost sharing requirements before the plan pays 100 percent. Also, there are expenses that are not covered by your health plan. These expenses may be reimbursed through the FSA Plan if the expense is for the diagnosis, cure, treatment or prevention of a disease, and for treatments affecting any part or function of the body. These expenses cannot be reimbursed by insurance or any other source. A list of eligible health care expenses can be found at the end of this guide. For a current list of eligible expenses, visit our website at under the Employees option. Remember, expenses for all family members claimed on your Federal Income Tax Return are eligible expenses under the Flexible Spending Account Plan. Health Care Flexible Spending Account Reimbursements On your health care flexible spending account, regardless of your account balance, your full annual election is available at the beginning of the plan year even though you have not contributed the entire amount yet. Claims must be incurred (date you receive the service) during the plan year, not the date you paid for them.

2 Dependent Care Flexible Spending Account Certain dependent care expenses can be reimbursed through a Flexible Spending Account. In order for the cost of childcare and dependent care to be eligible under the Flexible Spending Account, the following criteria must be met: The expense must be necessary for you and your spouse, if married, to continue employment, or your spouse must be a full-time student. An eligible dependent is defined as any person who can be claimed as a qualified child or qualified relative under IRS guidelines Publication 503, Child and Dependent Care Expenses. Children must be under age thirteen (13). Other eligible dependents over the age of 13 must be physically or mentally unable to care for themselves and reside with you for more than half the year. Divorced parents can claim a child if the child lives with you for half the year. See IRS Publication 501. The person providing services may not be a child of yours under the age of nineteen (19), nor anyone whom you claim as a dependent for Federal Income Tax purposes. If services are provided in a daycare center, the center must comply with all state and local laws and regulations. If your childcare provider is an individual, the provider must report this revenue to the IRS as income. The maximum amount that can be claimed per Plan Year is $5,000 if you are head of household or married and file a joint return; or $2,500 if you are married and file a separate return. When utilizing the Flexible Spending Account for dependent care expenses, you cannot apply these same expenses for the Federal Dependent Care Tax Credit. PLEASE consider carefully your own situation or consult your tax advisor before deciding which method best suits your needs. For a comparison, visit our website at select Employees, under Employee menu and select Dependent Care Plan vs. Dependent Care Credit. Dependent Care Reimbursements You may only receive reimbursements up to the account balance at the time of your claim submission. If you submit a claim and do not have the total amount in your account, you will be paid up to your account balance, then as you continue to make contributions you will be paid automatically until that claim is paid in full. Eligible Expenses Before and after school care Preschools Day care centers Day camps (including summer and holiday) Services provided by someone who is not your minor child, or dependent for income tax purposes. Ineligible Expenses Kindergarten tuition Overnight camps

3 CHANGE IN STATUS: You will make benefit elections to one or more of the accounts (company-sponsored benefits, medical spending, dependent care spending) annually, prior to the beginning of a plan year. Once you make these selections, the IRS allows you to change the amount of your payroll deductions during a plan year only if there is a change in family status. A change in family status is defined by the IRS as: 1. Marriage/Divorce/Legal Separation 2. Birth/Adoption of a child 3. Change in employment of you, your spouse or dependent 4. Death of a spouse/dependent 5. Cost and Coverage Change (only applies to the Group Premiums and Dependent Care portion of the Plan, this change does not apply to Health Care FSA) THE USE IT OR LOSE IT RULE: The IRS allows employers to adopt a carryover clause for health care flexible spending accounts, and your employer has adopted this clause. This allows you to carry over unused health spending account funds (up to $500) to be made available in the next Plan Year. Unused funds in excess of $500 will be forfeited. Once the plan year has ended, you will have 90 days to submit incurred expenses for reimbursement for the prior Plan Year. The carryover clause does not apply to dependent care accounts. All unused money in dependent care accounts at the end of the Plan Year will be forfeited after the 90 day window for submitting claims has ended. COORDINATION WITH OTHER PLANS: Health Reimbursement Arrangements (HRA) and Flexible Spending Plans: If you are a participant of an HRA plan, expenses that are reimbursed from this plan cannot be submitted to the Health FSA for reimbursement. For example: If you had a deductible of $1,000 and your HRA plan reimburses you $200 of your deductible, then you would only be able to submit $800 of the deductible to the FSA plan since this is the member s responsibility. Health Savings Accounts (HSA) and Flexible Spending Plans: Federal regulations state that an individual is not eligible to contribute to an HSA if they are covered by another health plan which includes a general purpose FSA. This would also apply to an employee covered by their spouse s HSA plan. Since your employer offers an HSA plan option for your medical plan, they also offer the limited FSA. The limited FSA allows a participant to submit dental and vision expenses to the FSA plan. All medical expenses would be covered by the HSA. When making decisions at your medical plan enrollment, you should consider the requirements for participating in an HSA plan. You are not eligible to open and contribute to a Health Savings Account if already participating in a general purpose FSA. For example, in a calendar year plan, you should have a zero balance by December 31 in order to contribute to your HSA on January 1 of the following year.

4 ANSWERS TO FREQUENTLY ASKED QUESTIONS ABOUT FLEXIBLE SPENDING ACCOUNTS: WHAT IF I AM NOT COVERED UNDER MY COMPANY S HEALTH INSURANCE PLAN? GOOD NEWS! You and your family can still participate in the health spending or dependent care spending accounts. You do not have to be a participant in your company s Medical Plan in order to be an eligible participant under their FSA Plan. However, you cannot be covered under a Health Savings Account (HSA) and a general purpose flexible spending account at the same time. MAY I USE THE BALANCE AVAILABLE FOR HEALTH SPENDING ACCOUNT EXPENSES TO PAY FOR DEPENDENT CARE SPENDING ACCOUNT EXPENSES OR VICE VERSA? No. The IRS clearly states that the money allocated in one account cannot be used for another account. WHAT HAPPENS IF I DO NOT USE ALL THE FUNDS IN MY ACCOUNT BY THE END OF THE PLAN YEAR? Your employer has elected the carryover clause, which allows you to carry over up to $500 to the next Plan Year for health care flexible spending accounts. Any remaining money in your health care flexible spending account in excess of $500 will be forfeited after the 90 day window for submitting claims has ended. The IRS does not allow carryover for dependent care account. Any remaining money in your dependent care account at the end of the Plan Year and 90 day claim submission time frame will be forfeited. Forfeited funds are used by the Plan to offset administrative costs. WHAT HAPPENS TO MY ACCOUNTS IF I TERMINATE MY EMPLOYMENT? You will be able to request reimbursement for health and dependent care expenses for services provided prior to your termination. Some plans can limit the reimbursement filing limit to a number of days after your termination date. Please check your Summary Plan Description to see how your company s plan document defines these guidelines. If your employer is subject to COBRA, you may also elect Flex Cobra if you have a positive contribution balance in your FSA account at the time you terminate from the plan. CAN I CHANGE MY CONTRIBUTIONS DURING THE YEAR? Only if you have a change in status, such as: marriage, birth of a child, adoption, or a change in your or your spouse s employment status.

5 REIMBURSEMENT REQUESTS OR SUBSTANTIATION REQUIREMENTS The IRS requires you to submit receipts of expenses used under the Flexible Spending plan. Therefore all receipts must be retained by you in case of an audit. The following documentation is required and must be submitted when claiming an FSA expense for reimbursement. ORIGINAL DOCUMENTS are not required. Photocopies are sufficient. HOW TO FILE A CLAIM You may file a claim using the online portal ( or the mobile app (MyFlex available in the itunes App Store or Google Play). In addition, you may submit a claim via mail, , or fax to the address listed below. Please remember that when filing a claim, you must attach copies of itemized receipts to the reimbursement request claim form. The receipt must show the date and type of service for the expense. If receipts are submitted without a claim form, your claim will be denied. You can obtain a claim form from your Human Resources Department or from the IU Health website. Claim submission address: P.O. Box 628 Columbus, IN, Fax: (800) iuhflex@iuhealth.org DOCUMENTATION REQUIREMENTS Prescription Drug Receipts - receipts should indicate drug name, date of purchase and purchase price (co-payment). Itemized receipts or Statements - statement from provider indicating name of person for whom service(s) were rendered, the actual date of service, the type of service and the amount due. Explanation of Benefit (EOB) Worksheets from your insurance company, showing deductibles, co-payments or ineligible charges. Over-The-Counter items and services - cash register receipt must detail the item purchased. Dependent care expense - submit an itemized statement which includes the name, address and tax identification number or social security number of the provider, the child s name, dates of service for which services were provided and amount charged or indicate this information on the claim form and have the daycare provider sign the form. UNACCEPTABLE DOCUMENTATION Provider statements that only indicate amount paid, a carry-over amount or a credit card charged (no date of service provided). Copies of canceled checks. Credit card receipt (no detail of date, type, amount or provider name).

6 Important Information about Your Flexible Benefits Plan Don t forget the features of MyFlexOnline website that make your plan even easier to use! When you log into the secure MyFlexOnline portal, you can: File claims, including scanning and ing receipts Check your account balance Look up eligible expenses Print account statements See your savings Verify your elections Review your payments Manage direct deposit If you have not taken advantage of MyFlexOnline, go to register a username and password and find out how easy it makes managing your account. A more convenient way to file claims. With the convenient claims upload feature, you can take a snapshot or scan your receipt and send it to us from MyFlexOnline. The photo can be used to file a claim. You can submit a receipt anywhere and anytime from the MyFlexOnline website or our mobile app. Take your flex plan with you: Apps for iphone and Android. Need to check your balance, file a claim or submit a receipt while checking out at your provider? You can do all that and more with our new apps for the iphone and Android. They re FREE! Just search for MyFlex at the itunes App Store or Google Play. To log in, use the same ID and password as you do for the MyFlexOnline website.

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